Shilling weakens slightly, vulnerable to more losses

Kenya’s shilling was a touch weaker against the dollar on Thursday, with the currency seen vulnerable to further losses due to loosening liquidity following a sharp fall in government debt yields.

At 0705 GMT, commercial banks quoted the shilling at the dollar, slightly weaker on Wednesday close of 101.8595.

“Rates are coming off, liquidity is improving, so we could see it see begging to weaken towards 102.50 levels,” said one Nairobi-based trader.

The shilling, down about 12.7 per cent against the dollar this year, had firmed in recent weeks due to inflows of dollars from offshore investors chasing high-yielding government debt.

But in Wednesday’s auction the debt yields plummeted, even if they still remain at an elevated level.

The yield on the 182-day bill fell to 16.492 per cent from 21.028 per cent last week, while the yield on the 364-day bill dropped to 17.130 per cent from 21.212 per cent. Traders say rates have dropped due to a $750 million syndicated loan the government secured recently

In a sign of increasing liquidity in the money markets, the weighted average interbank lending rate fell to 10.12 per cent on Wednesday from about 15.1 per cent two weeks ago.